Although there are still uncertainties in macroeconomic policies, and it is expected that the increase in imports in the second quarter will also have a negative impact on the palm oil market, palm oil, as an agricultural product, is relatively less affected by policies and more affected by fundamental factors. It is expected that palm oil in the market outlook will oscillate upward under the support of good economic recovery momentum, serious upside-down prices of internal and external markets, the arrival of the peak consumption season and dry weather.
In 2009, the domestic oil market as a whole went out of an oscillating upward trend. However, palm oil and soybean oil, the two most active oil varieties, reached the highest point in the year in early December 2009. In early 2010, under the influence of negative factors such as the increase of the deposit reserve ratio by the central bank of China and the debt problem in the euro zone, the futures price began to fall sharply, reaching 8.1% and 8.6% respectively in just one month, and in 2010, it was "black". However, since February, driven by the sharp rise in the futures price of crude oil in the outer disk, soybean oil and palm oil have bottomed out, and by the end of February, the futures price has rebounded by 50% of the decline in January. The trend in February boosted the confidence of market investors and made more investors place higher expectations on March. However, after the national macro data was released on March 10th, both CPI and PPI unexpectedly increased by a large margin year-on-year, the expectation of the central bank to raise interest rates was further enhanced, and the market suffered a panic decline. On this day alone, the palm oil P1009 contract fell by more than 1%. At present, although there are some signs of stabilization in the market, the confidence of market investors has not been effectively restored. How will palm oil develop in the later period? Through the analysis of macro and fundamentals, the author finally draws the conclusion that the price of palm oil has stabilized at present and is expected to oscillate and rise in the later period.
First, China’s economic recovery momentum is improving, but the interest rate hike is expected to increase.
On March 11th, the National Bureau of Statistics released the main macroeconomic data in February, most of which showed an increase compared with the same period of last year, indicating that the economic recovery momentum in China was still good. For example, from January to February, China’s urban fixed assets investment increased by 26.6% year-on-year, and the total retail sales of consumer goods increased by 17.9% year-on-year. Both investment and consumption showed that the momentum of China’s economic recovery was better than expected. And from January to February, the added value of industrial enterprises above designated size increased by 20.7% year-on-year, and the growth rate was 16.9 percentage points faster than that of the same period of last year, indicating that the industrial recovery momentum is good.
However, surprisingly, the ex-factory price of industrial products rose by 4.9% from January to February, of which the ex-factory price of industrial products rose by 5.4% in February, 1.1 percentage points higher than that in January. From January to February, consumer prices rose by 2.1% year-on-year, of which consumer prices rose by 2.7% year-on-year, 1.2 percentage points higher than that in January and 1.2% higher than that in the previous month. PPI rose by 4.9% year-on-year, exceeding the market expectation range of 4.4%-4.7%, while CPI rose by 2.7% year-on-year, exceeding the market expectation range of 2.0%-2.5%. In February, the CPI rose sharply year-on-year, partly because of the influence of consumption and climate factors during the Spring Festival, and the increase in some food prices caused by heavy snow before the Spring Festival. However, the year-on-year growth rate of 2.7% still exceeds the highest value of 2.5% generally expected by the market. The year-on-year increase of CPI value exceeded expectations, which challenged the goal of preventing inflation and ensuring growth this year, and also enhanced the expectations of market investors for the central bank to raise interest rates in the second quarter, which suppressed the confidence of market investors to do more.
Second, the price of internal and external disks is seriously upside down, and there is a demand for compensatory growth in the later stage of palm oil.
In 2010, the upside-down trend of spot price of palm oil in the internal and external markets has intensified. At present, the spot price of palm oil in Malaysia is 625 yuan/ton higher than the domestic price. Generally, the price difference between the internal and external markets will decrease from April to July, so there is a high room for domestic palm oil prices to rise in the later period.
Malaysia’s palm oil exports will show a seasonal growth trend after March and April.
In the second quarter of each year, Malaysia’s palm oil exports basically showed an increasing trend, mainly due to the warmer weather and the emergence of the alternative advantages of palm oil, which will boost the palm oil price during this period.
Fourth, the dry weather led to a decline in palm oil production and boosted palm oil prices.
Recently, the dry weather in the main palm oil producing areas in Malaysia has intensified. According to the news released by the Ministry of Hydraulic Irrigation of Malaysia on its website, due to the influence of dry weather, the water levels of two rivers in Johor province, Sungai Muar and Sungai Benut, have dropped to "dangerous" levels, and these two rivers are the main rivers that irrigate plantations in this area. According to the forecast of the Malaysian Meteorological Bureau, the dry weather in parts of Malaysia’s main island and Sabah province is expected to last until May, and there will be no rain at all in the coming week. This may lead to a reduction of plantation output in this area by about 15%. Sabah province is the most important palm oil producing area in Malaysia, and a quarter of the national output comes from this area. In February, the palm oil production in Sabah province decreased by 15.7% compared with that in January, falling below 400,000 tons. It is expected that the palm oil production in Malaysia may decrease by 10% compared with that in February, which may lead to a sharp decrease in palm oil production this year. In 1983, 1987, 1992 and 1998, due to the influence of dry weather, the palm oil yield in Malaysia decreased by 10%, 23%, 1.4% and 17% respectively compared with the previous year. In addition, the Malaysian government is still implementing the oil palm tree replay project this year, which also means that the palm fruit harvest output will decline, thus affecting the Malaysian crude palm oil output. It is estimated that Malaysia’s crude palm oil production will decrease by 2.3% this year to about 17.2 million tons, which will boost palm oil prices.
Palm oil imports remained at a high level in the fifth and second quarters, which had a negative impact.
Judging from the situation of palm oil imports in China, except for the global financial crisis in 2008, palm oil imports in other years showed an increasing trend from April to June. Recently, according to the forecast of National Grain and Oil Information Center, the monthly palm oil import in China is expected to stabilize at 500,000-600,000 tons from April to June. At present, the port inventory of palm oil is still very large, and by the end of February, the inventory is about 500,000 tons, which has a certain suppression effect on the price of palm oil.
6. Technically, palm oil is expected to oscillate upward.
From a technical point of view, the palm oil futures price is supported around 6800, and it is strongly supported around 6500, but the pressure around 7000 above the futures price is relatively high. If the futures price can successfully break through 7000, it is expected to go up to the first target of 7400 in the later period; If you can’t effectively break through 7000, call back to 6500 at most.
Based on the above analysis, the author thinks that palm oil, as an agricultural product, will be less affected by policies and more affected by fundamental factors, despite the uncertainty of macro policies and the negative impact of the increase in palm oil imports in the second quarter. Therefore, the author believes that palm oil prices are expected to oscillate and rise in the later period. Investors can now pay attention to buying opportunities in the range of 6800-6900.
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